The Enterprise System Spectator

Wednesday, May 14, 2014

Moving Forward with DDMRP at Lightspeed

I love it when I'm proven wrong.

Back in 2011, I wrote a post on a new development in material planning: Demand Drive Material Requirements Planning (DDMRP). Read the preceding link for the full story. But to summarize, DDMRP builds upon and extends the concepts of MRP while borrowing the best
features of lean manufacturing and the theory of constraints. In my opinion, its most attractive feature is that it turns the focus in material planning from reliance on sales forecasts, which are always wrong, to positioning buffer inventory at strategic points in the supply chain, allowing material plans to be based largely on actual demand. Early adopters of the method show dramatic improvements in order fill rates with lower levels of inventory--the dream of every manufacturing executive.

Shortly thereafter the product management team in charge of manufacturing systems at NetSuite saw my post and expressed to me their interest in learning more. I pointed them to the thought leaders behind DDMRP--Chad Smith and Carol Ptak--and left it at that.

Fast forward two years later, at the NetSuite Suiteworld conference, where I arrive to find Chad Smith giving a breakout session on DDMRP and thanking me for the introduction.

Oh Ye of Little Faith

Here's where it gets interesting. I sat through Chad's presentation, which was fast-paced and thick with concepts and terminology. At the end, he opened for questions, and the room was nearly silent. Looking around the room, I thought, they don't get it.

Afterwards, I spoke with two members of NetSuite's product team and told them, "I think you are jumping the gun. Your customers aren't ready for DDMRP. Better to spend your time on more basic functionality and leave DDMRP for some point in the future."

I found out later that NetSuite pretty much had already decided the same thing.

A Seed Takes Root

Fast forward 12 months later. Arriving at this year's Suiteworld, I notice that there is another presentation on DDMRP. But this time it is not from someone promoting the concept, but from a NetSuite customer that is already applying it.

The customer is Lightspeed Technologies, a midsize manufacturer of classroom audio systems, and a NetSuite customer since 2005. Carl Cox, the firm's VP of Operations and CFO, was one of those in the audience at Chad Smith's DDMRP presentation the previous year, and he was intrigued by the concept. Although NetSuite itself was not going to pursue development of DDMRP, Carl reached out to Chad and soon they were talking about how to apply DDMRP to Lightspeed's business.

Early Results Promising

Now, Carl Cox along with folks from IntuiFlow were back at SuiteWorld this year to report on Lightspeed's implementation of DDMRP. The system is now up and running, with Lightspeed's previous material planning processes (mostly in Excel) running in parallel for comparison purposes.

I reached out to the Lightspeed and IntuiFlow team to see whether they could report some early results. Here's the top-line, quantitative, numbers:

40% inventory reduction in less than three months

Customer service maintained at 99+%

So, Lightspeed apparently had been maintaining high levels of customer service at the cost of excess inventory. Now with the new system they could maintain those high order fill rates but dramatically cut inventory levels.

In addition, the team reported that inventory buffer analytics in the new system were giving them insights into changes in demand patterns. It was also giving them early visibility into spikes in customer demand, allowing them to become more responsive. Finally, the new system was giving them "clear and intuitive signals," which improved the productivity of material planning personnel.

Power of Cloud Platforms and Ecosystems

Perhaps most NetSuite manufacturing customers are not ready for DDMRP. But at least one was. What I missed was the fact that even if NetSuite was not going to directly address
the customer's need, it didn't mean that the customer was out of luck.
NetSuite's ecosystem of partners and ISVs building on its CloudSuite
platform could provide a solution.

Furthermore, the solution didn't require years of development. By my calculation, Lightspeed got up and running with DDMRP in less than a year. Moreover, they did it with a product that didn't even exist when they started. This speaks to the tremendous productivity and efficiency of modern cloud development environments. Other customers that want to go down this path should go even faster.

If you are a NetSuite customer, you can sign up for a free "Snapshot Bundle" from IntuiFlow within your NetSuite environment, activate it, and run it against your own data. The snapshot will give you a simulation of the kinds of results you can expect with DDMRP.

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

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For information on how we can help your organization make and carry out these decisions, write to me.

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